and the speaker of -- speaker of the house had to fight to keep his job. >> the american dream is in peril as long as its namesake is weighed down by this anchor of debt. gwen: the 113th congress takes its oath of office, but even more battles await -->> look with favor on our nation and save us from self-inflicted wounds. gwen: covering a raucous week. peter baker of "the new york times," susan davis of "u.s.a. today". eamon javers of cnbc, and mike viqueira of nbc. >> award-winning reporting and analysis, covering history as it happens. live from our nation's capital, this is "washington week" with gwen ifill. corporate funding for "washington week" is provided by -- >> this rock has never stood still.

since 1875 we've been there for our clients through good times and bad. when their needs changed, we were there to meet them. through the years, from insurance to investment management. from real estate to retirement solutions, we've developed new ideas for the financial challenges ahead. this rock has never stood still and that's one thing that will never change. prudential. >> additional corporate funding for "washington week" is provided by boeing. additional funding is provided by the annenberg foundation, the corporation for public broadcasting, and by contributions to your pbs station from viewers like you. thank you. once again, live from washington, moderator gwen ifill. gwen: good evening. nothing says bipartisan cooperation like ringing in the new year by counting down to a midnight vote to raise taxes.

by the time the fiscal cliff drama drew its only temporary conclusion this week, speaker boehner was pledging not to negotiate with president obama, president obama was promising not to negotiate over the debt limit, and vice president biden seemed like the only one left in a good mood. >> public service was never meant to be an easy living. extraordinary challenges demand extraordinary leadership. so if you've come here to see your name in the lights or to pass off a political victory as some accomplishment, you've come to the wrong place. the door is right behind you. >> i think most of our members, and we are never unanimous, but we do have consensus, most of our members know that for the president to have leverage on the next hurdles that we face that we had to get over this hurdle. gwen: the president signed the budget bills after resuming his holiday vacation in hawaii and before congress today

officially certified the electoral college vote that will return him to the white house. but things are by no means settled here in washington because there is almost certainly more to come. the folks around this table have covered this epic political and policy battle around the clock. literally, as joe biden would say. in the short term, the outcome looked like a win for president obama and a loss for speaker boehner. did it look that way close up too, susan? >> i think it did. for the speaker it was a very bad week. it's been a bad couple of weeks, i think. it started before they even got to this deal. it started when he tried to lead his conference down a separate path a couple weeks ago and said hey, i think i have an idea how we get around this and he couldn't get enough of his own members to support him. that set him on a path where it started to open the question of whether he could deliver at all. it took him out of the equation. he even said this is now for harry reid and mitch mcconnell

to decide and they couldn't either the when they actually did vote on new year's eve it undermined what has been the governing rule of the republicans for the past decade, which is nothing should pass without a majority vote and they didn't have a majority vote, and then immediately turned around to re-elect him speaker. it was never really in doubt. but i think having 12 votes, essentially 12 votes on the floor against -- against his speakership being re-elected with only 220 votes does not send a message of strength going into these next rounds. gwen: and mike, when all is said and done -- nice pen drop there! -- when all is said and didn't you president was still able to wrangle his basics. he wanted to be able to raise taxes on the wealthy, however you define wealthy, and he got that. >> certainly the white house and other democrats look at this and say this is a water

shed moment. we got the democrats to break the cardinal, visceral value they have, raising taxes. the only problem is on new year's day taxes were already high. but hell hath no fury like a speaker scorned. he is going to have to make up with his base, with conservatives, with his core on this next go-around in two months. this triple jeopardy with the debt ceiling vote and the continuing resolution and the sequestration that they punted two months down the road, and republicans are already making noises, threats even that the government is going to close. two senators today raised that possibility. gwen: they say a shutdown is a good idea? >> yes. >> how toxic are things? >> it's pretty awful. you see these reports that the leaders behind closed doors are using epithets with each other. pretty bad. if you're a republican you have to look at this and say how did we get to the point where

barack obama put an offer on the table that also included hundreds of billions of spending cuts and all the things that the republicans wanted or at least a lot of 9 things that republicans wanted and then they ended up getting a deal that didn't include barely any spending cuts at all? they negotiated themselves into this box canyon where they were just stuck and ended up with something really disaster russ from a republican perspective. that's why boehner is going to have to deliver to his caucus and if this was disastrous, march is going to be apocalyptic. a big, big fight. gwen: but no one liked this deal in the end, so the president didn't come out smelling like a rose either, necessarily? >> on the home page of the paper up had a story saying

republicans in revolt and one saying left unhappy with obama. tom harken expressed were -- what a lot of people in the base felt, which was that president obama caved in too easily, should have stuck to his guns, etc., all of think -- which the white house looks at and says yeah, you guys are great armchair negotiators, try getting in the room with the republicans and doing this. you have this uneasy truce, cease fire between president obama and his liberal core, the pundits and activists and people who dominate the chattering class, and -- when there was a threat of a mitt romney presidency and now that's over. he has to go back and deal with this republican house, and if that's not difficult enough, he has to hear the sniping from

the political left. gwen: and you think once it's settled, it's settled but it's not settled at all. >> it's not. if we had gone over the fiscal cliff everybody's taxes would have gone up a whole heck of a lot in may. may have caused another recession. but it was ultimately survivable. some forecast even said it was a good thing. but the debt limit is something you can't mess around with. if the country's full faith and credit is somehow violated, that who's huge, immediate repercussions. >> what was interesting to me from the quasi-wall street perspective, i talked to all the members i talked to that were fully aware that the market was trading up and down throughout iffer speech on this entire crisis and that's going to be on the debt ceiling as well.

the markets are going to want to know whether washington has to do -- has the stomach to do what it takes to prevent another crisis. >> the president said he's not going to negotiate the debt deal like he had to in 2011. well, that's an open question. liberal supporters are unhappy, saying if he dawes a line in the sand, does he stick to that? republicans are unhappy and think -- they say we're going to push up to the end. gwen: and some are unhappy with how he handled it, poking him in the eye, and they're prepared to fight tooth and nail to get over this humiliation they suffered? or am i being -- >> well, i think all presidents do things that the opposing party doesn't like, the way they handle campaign events. the politics of the maholm.

i do think there is a, we hear the term a lot, a trust deficit. when you talked about using epithets and the anecdotes we've heard, even with mcconnell and reid and how they stopped speaking altogether, the next fight is so close up, i don't know if there is time for the wounds to heal. gwen: next fight is in march? >> the next fight starts now. gwen: that's true. >> i think the president did from the beginning of the negotiation go to school on some of these past confrontations. he's had them every year in his presidency and had some go right up to christmas. but the day after the election john boehner has a press conference and he's trying to jump out in front and steal a march on the president. by conceding the idea that the republicans could go for a raise in revenue, $800 billion, ironically the package had less, $600, but he still had to

draw the line on raising tax rates. that's where he had to cave and the president got to show some flexibility knowing that boehner was, had no flexibility, ramrod stiff. >> interesting you mentioned the fact that the president is not going to negotiate here but the fact of saying that is a negotiation in itself. it means his opening bid is now zero and he's going to wait and see what -- >> congress has to vote. how does he get around that in >> and the other thing is what we've been discussing these last two months is the easy part. tax cuts. the vote they took penalized only the slightest sliver of americans out there because nobody was talking about keeping the payroll tax cut. now we're talking about spending cuts, taking things away from almost everybody if they do it the way they're told they have to. gwen: 0 let's stop for a moment and take a look at some of what

the president and mitch mcconnell had to say this week. >> one last point i want to make. while i will negotiate over many things, i will not have another debate with this congress over whether or not they should pay the bills that they have already racked up through the laws that they passed. >> the president claims to want a balanced approach. now that he has the tax rates he wants, his calls for balance means he needs to join us in the effort to achieve meaningful spending reform. the president may not want to have this debate, but it's the one he's going to have because the country needs it. gwen: so who has the leverage here at this point? >> that's a great question. it depends on which way you look at it. i think democrats coming off the fiscal cliff feel they have a position of strength because they saw what happened in the house hand -- and john boehner

could not get nutch members behind what was essentially a conservative plan. any time he's going to come to the table and say this is where i need to be, it opens the question can you even deliver on that? the republicans do feel they have leverage because there is a certain amount of public opinion on their side. if you look at the polling people say we need to rein in spending, our debt ond -- and doist -- doifers. gwen: is john boehner out of this conversation snourk the guy who is liked new -- but not necessarily feared? >> great question. it depends on how he plays this. he needs a moment where he can seem on top of it again. mitch mcconnell seems like a much more influential republican and someone who has a proven track record of negotiating with the white house on this deal and previous deals over tax cuts. >> i was really surprised that

mitch mcconnell, who has a re-election battle coming up in two years in kentucky and could face a challenge from his right, went out on that limb and made that deal with joe biden that essentially cut taxes after the first, and then all the drama, the white house is balking, 89 people in the senate, 40 republicans were out on the limb, mixed metaphors, having the rug pulled out from under them -- gwen: just mix them up. why not? [laughter] >> and john boehner, i think there is ansumption around circles that this is his last term. >> the fact that we're even talking about that means he's a weakened speaker the >> he's a weakened speaker. gwen: part of that weakness is the little mini rebellion which never quite happened when he was speaker before. some tried to get a group in a

keystone kops way to vote against him. but more important to me were the self-influcted -- self-inflicted wounds as we heard the chaplain talking about. >> right. >> on a political chessboard of internal palace intrigue politics, our people were played last night as a pawn. and that's why people hate washington, d.c. that's why they hate this politics. last night it was my party responsible. both parties can take plenty of responsibility over time, but last night my party was responsible for this. gwen: i know you all don't hate washington, d.c., just what washington can do. we understand that. or can't do! how much is that sort of dit -- distraction adding to the problem? >> it was a huge problem for boehner. as he was trying to gavel down the 112th congress and let it

die a lot of new jersey and new york republicans and democrats expected they were going to get a vote on the hurricane sande aid and they were shouting as he was gaveevpling it down, wait, wait, we need our vote. you didn't play it there but chrissie named boehner and said it was his fault. boehner is caught between new jersey republicans who want this spending and a conservative base that doesn't want to see any more spending. they want to see if it happens, it should be offset with other cuts and they were trying to give the anti-spending folks something to hang their hats on. very, very tough situation. >> and that's what boehner is up against. he couldn't get that bill -- fit that bill with the money for hurricane aid no matter how

angry chris christy got. >> they did pass something today and are going to do a bizarre two-step process january 18 with sandy aid and then an amendment that is even bigger than the bill itself and try to pass one of those and send it be to the senate where it is entirely uncertain what is going to happen there. gwen: and the deal closer in this was joe biden? >> yeah. he was on the sidelines to is it -- some extent for a while. he wasn't out front the way he had been. part of that, of course, is because this was seen as being a house deal and biden is a senate guy. come the end of boehner and it goes to the senate, mcconnell spends three or four minutes deciding he can't talk with harry reid and picks up the phone and says joe, is there anybody over there that can cut a deal? this remarkable series of 13, 14, 15 phone caults over the

next 24 hours in which these go lions, long-standing members of the washington establishment cut through all the sturm und drang and come up with this deal. suddenly biden is the center of the action again. the head of the gun control quick review task force. and as you said, there is nobody happier than biden. gwen: and nobody who knows how to show is off more. i as -- also wonder, make the white house isn't as fractured as people says but the senate, we saw this week, mcconnell made clear how unhappy he was with the idea of filibuster reform which is something harry reid has been pushing. is that one more explosion waiting to happen? >> potentially. tp depends on what harry reid does with changing the rules of the senate and whether he

decides to upened the way the chamber -- chamber has been operating to make bills ead -- easier to bring to the floor the a lot of legislation has been backed up in there. but the senate is this chamber that relies on such decorum and rules and behavior and for senators like mcconnell that have devoted their lives to the institution and a lot of democrats too, un -- up ending these rules could make already difficult negotiations a lot harder. that's the threat mcconnell is seeing -- if you go here and do this, any chance of working together for the foreseeable future is done. gwen: well, call me pollyanna here but for a moment assume that you can take away from what we saw this week a grand bipartisan compromise. ugly, sausage-making, but a compromise.

could that set the groundwork for grand bipartisan compromises to come? >> it was sort of a breathtaking compromise. that moment where you got done with the mcconnell-biden phone calls and mcconnell goes to the senate floor and says you know what? we should have a deal where we just do the tax pieces and forget the spending cuts. i about fell over because the republicans had been saying the cuts were what they wanted all along and here comes mcconnell from the talks with biden saying forget the spending cuts. i he made a republican congressman i know and said is there any way you are going to take this deal and he he marlede -- he maid back saying i think we have to. >> the weird thing is we love to bash washington, and washington deserves being bashed, but the truth is this is the end of a 10-year debate.

the president passed these tax cuts, president bush, and couldn't get them passed. we're now done with it. we know what the income tax rates are going to be. there are going to be other tax fights but we know now that the vast majority of the bush tax cuts will live on in another way. not a small thing. gwen: are they hearing from folks at home saying what are you doing up there? is public opinion playing any role in the desire to get past any of this? or are they in such a bubble that they're not aware of what -- of how this is going over? >> i think part of what happened new year's day when this 88, 89-vote thing comes across the rotunda, i think after that, eric kantor very dramaticy announces that he's not going to announce it and suddenly the world explodes and it's called into question whether everybody is paying

higher taxes, i think the republican conference stared into the abyss and it took a few hours for it to take hold. it took a few hours, as eamon aves source shows, but look at the final rote. a third of them voting for it, still 2/3 against it, for for them to allow, to go other -- along with the idea that this was going to be put on the floor to begin with, i think that's something. >> we've created a culture now where the only way washington ever really moves is on a brinksmanship disaster. it has to be a default, a shutdown, or a fiscal cliff -- >> the very last second. >> right. there are so many problems that they can't solve and we've created a place now where even -- even newtown was what it took to start talking about gun egsslegs. it has to be either reactionary

or a crisis. gwen: newtown is what got the republicans back to the table before. >> we're at a place where it's now difficult for congressional to pass things like transportation bills which used to be very easy to pass the gwen: farm bill? >> farm bill, another great example. a lot of this was extensions of current laws. they didn't reinvent the wheels in this. it was keeping everything the same. gwen: you don't sound optimistic here. >> i'm not optimistic. this was a very discouraging fight and i think that this was the easy one. if we default on our debt, we are in a bad way both economically and sort of what it says about the state of our government. >> i think the irony is we've just sworn in a new congress, the most diverse, broadest spectrum of people represented

but the ideological middle is shrinking. gwen: on that cheerful note -- that's ok. it wasn't required to be cheerful. thanks, everybody. we've got to go for now, but the conversation continues online on the "washington week" webcast extra. you'll be able to find us still talking at pbs.org/washingtonweek. while you're there, you can read about my five -- count'em, five -- resolutions for the new year. keep up with daily developments over at the pbs newshour, and we'll see you again right here next week on "washington week." good night. captioned by the national captioning institute --www.ncicap.org-- >> corporate funding for "washington week" is provided by -- >> we know why we're here. to chart a greener path in the air and in our factories. >> to find cleaner, more

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